These cost reductions free up capital for companies to reinvest in themselves, driving innovation and growth.

But, how do cloud services help businesses save money?

The answer is a combination of distributed resource costs, flexibility, simplification of internal processes, and increased resiliency against loss of data.

The Power of Virtualized Infrastructures

Most modern cloud companies offer a virtualized public cloud for their clients. These virtualized cloud setups make incredibly efficient use of the cloud service provider’s available hardware.

One of the old difficulties with making efficient use of computing resources is that common architectures such as the x86 architecture are designed to have one physical machine running one OS at a time. This would limit the number and variety of applications that the machine could run at once.

Basically, if you needed 10 different setups for your business, you’d need 10 different machines, even if each one only would take up about 5% of the hardware’s resources.

Virtualization artificially partitions one physical machine into several different virtual machines, or VMs. This allows for a far more efficient division of resources—one machine could run 10 VMs for the software setups from the above example and still have 50% capacity remaining.

While companies could use virtualization on their own internal infrastructure to realize significant cost savings, cloud service providers take this advantage a step further.

On a virtualized public cloud setup, costs are distributed among all of the cloud provider’s clients. Companies only have to pay for the resources they actually use—not the entire server farm. If resources need to be added or removed, this can be done in minutes

This provides a significant reduction in capital costs for IT infrastructure both up-front and over time.

Reducing Complexity of Management

One major differentiator between cloud services is how they can reduce the complexity of management for key IT operations. This is a benefit that will change from one cloud service provider to the next.

Managed cloud service providers offer an enormous reduction in management complexity by taking over key aspects of infrastructure maintenance such as vulnerability patching, security event monitoring, and basic troubleshooting.

This frees up a company’s internal IT team to focus on driving innovation with their resources. By doing so, the IT team can help boost revenues.

The alternative would be to hire a dedicated IT team that only focuses on infrastructure maintenance and security patching. However, these are job roles that require personnel with specialized experience and knowledge, roles that can easily demand a six-figure yearly salary.

Not every cloud service provider offers the same managed services, so it’s important to evaluate what any given provider has to offer and what the cost of the service would be.

Increasing Resiliency Against Disaster

One of the worst things that can happen to a modern business is the loss of mission-critical data and applications. Disaster events that can compromise business infrastructure take many forms, not all of them natural. From power outages, to network failures, to human errors, there are countless events that could sever a company’s connection to its primary production environment.

Each and every minute that a business goes without the ability to access its data, the worse the damage is. For many businesses, being unable to access mission-critical data and applications for just 24 hours could be enough to drive the business to bankruptcy.

Having cloud-based disaster recovery as a service (DRaaS) to minimize disruption after a disaster can save a company far more money that what the cost of such service would amount to over a period of years.

Naturally, not all DRaaS offers are the same, and business need to closely vet any such service for their recovery time and recovery point objectives (RTOs and RPOs), as well as the geodiversity of the replication targets.

Overall, using the cloud is a great way to reduce costs for a company’s IT needs—so long as the company is using the right cloud services provider.